Nigeria’s FX Market Hits $1.83 Billion in One Week as Naira Gains in Official And Black Markets
- The Nigerian foreign exchange market has recorded increased foreign exchange transactions at the official market
- The Forex market hit a transaction volume of $1.83 billion in just a week, signalling increased investor confidence
- The development comes as the naira appreciated marginally at the official window in the week under review
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Nigeria's official foreign exchange market recorded a total transaction volume of $1.83 billion weekly, showing increased FX activities.
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, confirmed the development during an interactive session and said the significant increase in FX transactions was due to reforms initiated by the CBN, yielding positive results in the market.
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Investors' confidence growing in FX market
The rise in dollar liquidity has reportedly reaffirmed investors' growing confidence in the Forex market.
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The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, also said at the event that the Nigerian government was committed to easing the pains of Nigerians via social security strategy.
Also, the apex bank recently announced that it had removed the +2.5% cap spread on interbank Forex transactions.
The statement was contained in a circular dated February 8, 2024, and signed by the Director, Financial Markets Department, Duke Omotunde.
The circular said:
"A key objective of the CBN's ongoing foreign exchange market reforms is to promote a market-based price discovery system. Consequently, the bank discontinues any cap on the spread of interbank foreign exchange transactions and restrictions on the sale of interbank proceeds.
"Authorised Dealers are to continue to conduct their foreign exchange transactions on a "Willing Buyer and Willing Seller" basis. In addition, they must strictly adhere to high ethical standards in their dealings in the foreign exchange markets. This includes but is not limited to adopting appropriate price disclosures and transaction transparency."
A breakdown of Forex activities in the FX market in one week
An analysis of the daily activities from Monday to Friday showed that the FX market recorded a turnover of $585.53 million on Monday, Tuesday,$465.29 million; Wednesday it was $209.93 million; Thursday it was $321.23 million, and on Friday, it was $253.77 million.
Reports say that the Nigerian currency closed at the parallel market at N1,500 per dollar on Friday, February 9, 2024, the same as Thursday, February 8, 2024, while it appreciated marginally at the official window to N1,469 per dollar from the N1,479 recorded on Thursday, February 9, 2024.
The development follows the directive by the CBN to the commercial banks that they are free to fix their Forex rates.
CBN tells banks to fix their own Forex rates
CBN's Director of the Financial Markets Department, Omolara Omotunde, disclosed this in a circular addressed to all authorised dealers, saying the bank has decided to discontinue any restrictions on the sale of interbank proceeds.
The circular came after the CBN governor, Olayemi Cardoso, told lawmakers that the bank has halted the Ways and Means advances to the Nigerian government until the government settles the outstanding balance, Legit.ng reported.
Commercial banks can now establish their rates based on demand by removing the caps in the spread at the interbank foreign exchange transactions.
The move allows the market to decide what it considers a fair rate for foreign currencies, especially the US dollar.
Banks now have more flexibility to sell Forex to anyone they choose, and the change could result in more rapid and easier access to Forex for businesses and individuals.
The apex bank said authorised dealers are to continue conducting their FX transactions on a 'Willing Buyer and Willing Seller' basis and adhere to high ethical standards in their FX markets.
CBN confirms highest dollar Inflow in 19 months
Legit.ng reported that the Nigerian currency, the naira, rallied against the US dollar in the official market on Wednesday, February 7, 2024.
The local currency traded at N1,418.78 per dollar against the N1,421.19 traded on Tuesday, February 6, 2024.
According to data from NAFEM, traders at the Forex market quoted an intra-day high of N1,510 per dollar and an intra-day low of N826.28.
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Source: Legit.ng
